Join Boston BASIC (Building A Sustainable Investment Community), a consortium of Boston area SRI professionals, on Thursday, October 11th for a practical discussion of the considerations fiduciaries should take into account when incorporating environmental, social and governance factors into their investment process. The event will take place in Boston.
The discussion is hosted by George Michael Gerstein, Co-Chair Fiduciary Governance at Stradley Ronon, and joined by:
Hillary Flynn, ESG Analyst at Wellington Management
Mary Gregory, Sustainable Investing Specialist at Brown Advisory
Join industry leaders for a 60-minute webinar on Thursday, October 4, 2018 at 11 a.m. (EDT) to discuss the potential impact of the SEC’s Best Interest Proposals on the fund industry. Topics will include:
Overview of the Proposals, Including Regulation Best Interest
Key Themes in the Comment Letters
Impact on Fund Distributors, Dealers and Funds, including Non-Cash Compensation and Other Distribution Practices
Evolving Process and Future Suitability Concerns
Helen E. Rizos, Senior Vice President & Deputy General Counsel, Fidelity Investments
On September 13, 2018, the Chairman announced a review of staff guidance to determine if prior positions “should be modified, rescinded or supplemented in light of market or other developments.”1 In conjunction with the Chairman’s statement, IM staff withdrew two interpretive letters that gave guidance to investment advisers seeking to comply with the proxy voting requirements of rule 206(4)-6 under the Investment Advisers Act of 1940, which, among other things, requires investment advisers to vote client securities in the best interest of clients and to describe how they address material conflicts of interest between themselves and the clients on whose behalf they are voting.2 While rule 206(4)-6 does not dictate how an investment adviser must address conflicts, the adopting release discusses options, including engaging a third party to vote a proxy involving a material conflict or voting in accordance with a pre-determined policy based on recommendations of an independent party. The letters addressed how investment advisers that have a material conflict can determine that a proxy advisory firm is capable of making impartial recommendations in the best interests of the adviser’s clients. The SEC left in place 2014 staff guidance that enshrines the principles of the two interpretive letters.3
IM staff indicated in its statement that its withdrawal of the letters was designed to “facilitate discussions” at the Roundtable on the Proxy Process,4 which is expected to be held in November, and that staff was seeking views on the 2014 staff guidance. The U.S. Chamber of Commerce and some corporate secretaries have criticized proxy advisory firms for years, claiming proxy advisory firms lack transparency and accountability, and as part of these efforts, the corporate community has lobbied to withdraw the letters.5 Legislative efforts to directly regulate proxy advisory firms also have been proposed.6 For further information on the impact of the current and potential future SEC and staff actions, and advice on how to respond, please contact us at Stradley.
6 For example, HR 5311 was introduced in May 2016 and later folded into the Financial CHOICE Act. More recently, in October 2017, HR 4015, which is mostly a resubmission of HR 5311 was introduced. These bills generally require registration of proxy advisory firms with the SEC, and require firms to meet extensive disclosure requirements relating to methodologies and conflicts of interest, require firms to hire an ombudsperson to handle complaints, and give corporate issuers the ability to vet proxy advisory firms’ recommendations before the recommendations are released.